Appreciate the explanations @timcliff; some things are a little clearer to me than they were before.
The thing I am not quite clear on is how this "pegging mechanism" can effectively work when SBD is widely traded (and speculated in) by people who are — in effect — "external" to Steemit.
If you're a "speculator/gambler," the only thing you'd see is a token with a relatively small market cap that you can pump up in price without having all that many resources. Seems to be what happened back in December/January when SBD spiking coincided with getting listed on a Korean exchange. I'm sure a lot of those traders were never anywhere CLOSE to our community here... they were just "speculators."
Alternately, would you argue that "the pegging mechanism works" because we're back at near 1 SBD = 1 USD, even if it took seven months? Am I just misunderstanding the timeframe involved in what "works" means?
As @timcliff noted in his reply, you are absolutely right. But at the same time I don't think it is completely wrong to say that it 'works' in a sense, since it did not only return to $1 but it did so largely by the intended mechanism of printing more and more of it until the price declines.
In the short term, yes speculators can move the price (absent additional mechanism to peg it more strongly), but the higher the price goes, the more capital inflow is required to hold it there against the steady "drip, drip, drip" of continued new supply, and that ultimately becomes unsustainable. While sometimes slow, even a steady drip can eventually produce the grand canyon.
Or another way to say that is the speculators are not entirely external to Steemit, because Steemit users can and do "cash out" their rewards. When they do so, it requires a speculator to inject additional money to buy those newly-rewarded SBDs at the inflated price, or the price must decline.
Thanks for the explanation @smooth; appreciate you taking the time. Steemit/Steem seem like interesting experiments, in their own right.
My interest in the SBD peg primarily comes from a commercial interest. It's functionally difficult to use a currency to trade goods and services if it fluctuates wildly.
Quoting from one of my other replies here:
As noted by @timcliff in the post, perhaps other changes can be made in the future to reduce the upward spikes. Even without changes I do think it is possible (though hardly certain) that the price may become more stable over time as the system matures.
No, you are correct. As I mentioned in the post, there is little that can be done to hold the peg from going higher, unless additional mechanisms (such as reverse conversions) were to be implemented.
Thanks for the feedback @timcliff; yours and @smooth's replies helped clarify a bit further. One of my hopes is that an economy of sorts will eventually develop here, where people trade goods and services using Steem/SBD. If the fluctuations are too crazy, that's tricky to execute.
Check out: https://steemeconomy.com/
=)
Ah yes, I saw your announcement about it the other day, and that was an exciting development. I can't help but think that an "economic base" will also help the value of Steem grow.